This shift toward digital payments will be a result of demonetization — in early November, the Indian government announced the removal of the 500- and 1,000-rupee notes, which represented 86% of currency in circulation — that has left consumers cash-strapped and looking for alternative payment methods.

Although demonetization is spurring a digital revolution, it would be unrealistic to picture an Indian economy that is completely cashless in just three years. That's because it would entail a total overhaul of a massive payments industry — the country counts 740 million cards at present, and is the global leader in ATM terminals, with over 210,000 in the country. And though major firms are investing in the country to push digital payments, especially following demonetization, eliminating the existing infrastructure in full could be costly to financial institutions and frustrating to consumers, which makes it unlikely.

But that doesn't discount the rapid evolution of payments in India, which will continue to move toward a digital-first ecosystem.

India's smartphone market is rapidly growing, which will be essential to push the country towards adopting mobile payments. There are already over 350 million smartphone users in the country, with this number expected to grow past 700 million by 2020. That's larger than the number of users with bank accounts by a lot. As digital transactions become more commonplace in the country, smartphones will become an essential tool for payments firms, merchants, and consumers.

Not only do millions of users have access to alternative payment methods with their smartphones, but they have embraced these payments so far. Paytm, the popular mobile wallet in India has added over 20 million new users since November, and plans to onboard 5 million new merchants in 2017. On top of that, the digital payment app Bharat Interface for Money (BHIM), which was launched by Prime Minister Narendra Modi in late December, saw 5 million downloads in only four days.

It's likely these offerings will be advanced by companies flocking to India. Since demonetization, major firms like Amazon and Mastercard have pushed their digital payments offerings in the country. This increase in competition will put pressure on companies to continue making attractive updates, which in turn will appeal to more consumers, resulting in further adoption of digital payments.

The U.S. payments ecosystem is in the midst of a shift toward mobile, and countless new and old stakeholders are attempting to accelerate this migration, which is moving at a glacial pace relative to other markets globally. But mobile payments can rise to the mainstream. For companies seeking to build out a robust mobile payments product, China's thriving mobile payments ecosystem offers some insight — and some lessons.

Total mobile payments volume in China will reach $6.3 trillion by 2020, according to our estimates based on iResearch data. This marks a healthy 33% five-year compound annual growth rate (CAGR). In comparison, the U.S. will generate $154 billion in mobile payments volume this year by our estimates, which amounts to just 6.5% of China's mobile payments volume.

Even accounting for population discrepancies, China will generate over $1,700 in mobile payments volume per capita in 2016, compared with $475 in the U.S., based on forecasts from BI Intelligence and eMarketer. China's advantage will eventually diminish, but it will still produce around twice as much volume per capita in 2020.

China has unique factors buoying the industry, like the dominance of mobile phones, a lack of legacy infrastructure, and the surging popularity of digital retail marketplaces. Some of the characteristics behind the country's success can be mimicked, or even replicated to some extent, in other markets like the U.S. However, one fundamental barrier in the U.S. is that it's being forced to layer mobile payments on top of an existing payments system, and the ecosystem is very fragmented.

China claims the world's largest mobile payments market and serves as the global benchmark for other markets to pursue.China will process a whopping $6.3 trillion in total mobile payments by 2020, according to our estimates based on iResearch data. This marks a healthy 33% five-year compound annual growth rate (CAGR).

It dwarfs the U.S.' mobile payments industry.The US will generate $154 billion in mobile payments volume this year by our estimates, which equates to just 6.5% of China's mobile payments volume.Meanwhile, China will generate over $1,700 in mobile payments volume per capita in 2016, compared with $475 in the U.S., based on forecasts from BI Intelligence and eMarketer.

Mobile commerce, a lack of legacy infrastructure, and marketplaces have fueled China's enormous success.Consumers in China are much more comfortable shopping on their mobile phones compared with their counterparts in the U.S., and the devices face less resistance from other legacy payments methods like credit cards. The open approach to mobile shopping has been fortified by Alibaba, a Goliath-sized marketplace, and WeChat, a go-to messaging platform, which support Alipay and Tenpay, respectively.

Overviews the key competitors in China's mobile payments market, and how new entrants may shuffle the hierarchy of dominant players.

Uncovers the key drivers propelling China's mobile payments market.

Identifies which drivers the U.S. can import from China, and which barriers may be standing in the way.

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